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Stephenson was born William Samuel Clouston Stanger on 23 January 1897, in Point Douglas, Winnipeg, Manitoba. His mother was from Iceland, and his father was from the Orkney Islands. He was adopted early by an Icelandic family after his parents could no longer care for him, and given his foster parents' name, Stephenson.

He left school at a young age and worked as a telegrapher. In January 1916, in World War I, he volunteered for service in the 101st Overseas Battalion (Winnipeg Light Infantry), Canadian Expeditionary Force. He left for England on the S.S. Olympic on 29 June 1916, arriving on 6 July 1916. The 101st Battalion was broken up in England, and he was transferred to the 17th Reserve Battalion in East Sandling, Kent. On 17 July he was transferred to the Canadian Engineer Training Depot. He was attached to the Sub Staff, Canadian Training Depot Headquarters, in Shorncliffe, and was promoted to Sergeant (with pay of Clerk) in May 1917. In June 1917 he was "on command" to the Cadet Wing of the Royal Flying Corps at Denham Barracks, Buckinghamshire.

On 15 August 1917, Stephenson was officially struck off the strength of the Canadian Expeditionary Force and granted a commission in the Royal Flying Corps.[5] Posted to 73 Squadron on 9 February 1918, he flew the Sopwith Camelbiplane fighter and scored 12 victories to become a flying ace before he was shot down and crashed his plane behind enemy lines on 28 July 1918. During the incident Stephenson was injured by fire from a German ace pilot, Justus Grassmann,[6] by friendly fire from a French observer,[7] or by both. In any event he was subsequently captured by the Germans and held as a prisoner of war until he managed to escape in October 1918.[7]

For conspicuous gallantry and devotion to duty. When flying low and observing an open staff car on a road, he attacked it with such success that later it was seen lying in the ditch upside down. During the same flight he caused a stampede amongst some enemy transport horses on a road. Previous to this he had destroyed a hostile scout and a two-seater plane. His work has been of the highest order, and he has shown the greatest courage and energy in engaging every kind of target.
- Military Cross citation, Supplement to the London Gazette, 22 June 1919.

This officer has shown conspicuous gallantry and skill in attacking enemy troops and transports from low altitudes, causing heavy casualties. His reports, also, have contained valuable and precise information. He has further proved himself a keen antagonist in the air, having, during recent operations, accounted for six enemy aeroplanes.
- Distinguished Flying Cross citation, Supplement to the London Gazette, 21 September 1928.

After World War I, Stephenson returned to Winnipeg and with a friend, Wilf Russell, started a hardware business — inspired largely by a can opener that Stephenson had taken from his POW camp. The business was unsuccessful, and he left Canada for England. In England, Stephenson soon became wealthy, with business contacts in many countries. In 1924 he married American tobacco heiress Mary French Simmons, of Springfield, Tennessee. That same year, Stephenson and George W. Walton patented a system for transmitting photographic images via wireless[8] that produced £100,000 a year in royalties for the 18 year run of the patent (about $12 million per annum adjusted for inflation in 2010). In addition to his patent royalties, Stephenson swiftly diversified into several lucrative industries: radio manufacturing (General Radio Company Limited[9]); aircraft manufacturing (General Aircraft Limited); Pressed Steel Company that manufactured car bodies for the British motor industry; construction and cement as well as Shepperton Studios and Earls Court. Stephenson had a broad base of industrial contacts in Europe, Britain and North America as well as a large group of contacts in the international film industry. Shepperton Studios were the largest film studios in the world outside of Hollywood.

As early as April 1936, Stephenson was voluntarily providing confidential information to British opposition MPWinston Churchill about how Adolf Hitler's Nazi government was building up its armed forces and hiding military expenditures of £800,000,000. This was a clear violation of the terms of the Treaty of Versailles and showed the growing Nazi threat to European and international security. Churchill used Stephenson's information in Parliament to warn against the appeasement policies of the government of Neville Chamberlain.[10]

Stephenson's initial directives for BSC were to 1) investigate enemy activities; 2) institute security measures against sabotage to British property; and 3) organize American public opinion in favour of aid to Britain. Later this was expanded to include "the assurance of American participation in secret activities throughout the world in the closest possible collaboration with the British". Stephenson's official title was British Passport Control Officer. His unofficial mission was to create a secret British intelligence network throughout the western hemisphere, and to operate covertly and broadly on behalf of the British government and the Allies in aid of winning the war. He also became Churchill's personal representative to U.S. PresidentFranklin D. Roosevelt.[citation needed]

The Princess Hotel in Bermuda, home to British Imperial Censorship during the war, and to Sir William Stephenson after the war.

While it was still neutral, agreement was made for all trans-Atlantic mails from the USA to be routed through the British colony of Bermuda, 640 miles off the North Carolina coast. Airmails carried by both British and American aircraft were landed at RAF Darrell's Island and delivered to 1,200 censors of British Imperial Censorship, part of BSC, working in the Princess Hotel, who examined letters for secret communications before resealing them to leave no indication that they had been read. With BSC working closely with the FBI, the censors were responsible for the discovery and arrest of a number of Axis spies operating in the US, including the Joe K ring. After the war, Stephenson lived at the Princess Hotel for a time before buying his own home in Bermuda.[11]

Stephenson worked without salary.[citation needed] He hired hundreds of people, mostly Canadian women, to staff his organization and covered much of the expense out of his own pocket. His employees included secretive communications genius Benjamin deForest "Pat" Bayly and future advertising wizard David Ogilvy. Stephenson employed Amy Elizabeth Thorpe, codenamed CYNTHIA, to seduce Vichy French officials into giving up Enigma ciphers and secrets from their Washington embassy.[12] At the height of the war Bayly, a University of Toronto professor from Moose Jaw, created the Rockex, the fast secure communications system that would eventually be relied on by all the Allies.[13]

Camp X graduates operated in Europe (Spain, Portugal, Italy and the Balkans) as well as in Africa, Australia, India and the Pacific. They included Ian Fleming (though there is evidence to the contrary), future author of the James Bond books. It has been said that the fictional Goldfinger's raid on Fort Knox was inspired by a Stephenson plan (never carried out) to steal $2,883,000,000 in Vichy French gold reserves from the French Caribbean colony of Martinique.[14]

BSC purchased from Philadelphia radio station WCAU a ten-kilowatt transmitter and installed it at Camp X. By mid-1944, Hydra (as the Camp X transmitter was known) was transmitting 30,000 and receiving 9,000 message groups daily — much of the secret Allied intelligence traffic across the Atlantic.[citation needed]

In November 1946 Stephenson received the Medal for Merit from President Harry S. Truman, at that time the highest U.S. civilian award; he was the second non-American to receive the medal.[15] General "Wild Bill" Donovan presented the award. The citation paid tribute to Stephenson's "valuable assistance to America in the fields of intelligence and special operations".

The "Quiet Canadian" was recognized by his native land late: he was made a Companion of the Order of Canada on 17 December 1979, and invested in the Order on 5 February 1980.

Sir William Stephenson played a key role in the creation of the CIA. He realized early on that America needed a strong intelligence organization and lobbied contacts close to President Roosevelt to appoint a U.S. "coordinator" to oversee FBI and military intelligence. He urged that the job be given to William J. "Wild Bill" Donovan, who had recently toured British defences and gained the confidence of Prime Minister Winston Churchill. Although Roosevelt didn't establish exactly what Sir William had in mind, the organization created represented a revolutionary step in the history of American intelligence. Donovan's Office of Strategic Services was the first "central" U.S. intelligence service. OSS worked closely with and learned from Sir William and other Canadian and British officials during the war. A little later, these OSS officers formed the core of the CIA. Intrepid may not have technically been the father of CIA, but he's certainly in our lineage someplace.

On 8 August 2008, Stephenson was recognized for his work by Major General John M. Custer, Commandant of the U.S. Army Intelligence Corps. Custer inducted him as an honorary member of the U.S. Army Intelligence Corps, an honour shared by only two other non-Americans.[16]

In 1997, a new public library built in Winnipeg was named for him, after a vote was held to choose the name of the new library. Leo Mol donated a miniature of his statue of Stephenson to the library.

On 24 July 1999, The Princess Royal unveiled, in Stephenson's hometown of Winnipeg, Manitoba, near the Provincial Legislature on York Street, Leo Mol's life-sized bronze statue of Stephenson in military aviator uniform. The monument is dedicated to Stephenson's memory and achievements.[17]

In 1976 British-born Canadian author William Stevenson published a biography of Stephenson, A Man Called Intrepid. Some of the book's statements have been called into question, notably in Nigel West's Counterfeit Spies (1998). "Intrepid" was probably not Stephenson's codename, but BSC's telegraphic address in New York. Stevenson was a frequent visitor to Bermuda, where Stephenson had taken up residence during after the war. He was an ex-naval officer, having served in the Fleet Air Arm during the war with prominent Bermudian lawyer William Kempe (a founding partner of Appleby, Spurling & Kempe), a prominent Bermudian law firm (another author and frequent visitor to Bermuda was ex-naval officer Ian Fleming).

Many consider to be a more reliable account H. Montgomery Hyde's The Quiet Canadian (1962, before Stevenson's book). But generally acknowledged as the most accurate account of Stephenson's life is Bill Macdonald's The True Intrepid (1998), with foreword by a CIA staff historian. The book clears up the spymaster's fictitious background and contains oral histories from his ex-agents.

In Counterfeit Spies, Bermuda resident Rupert Allason (Nigel West) reports that no record exists of Stephenson having received the French Croix de guerre avec Palmes or the Légion d'honneur. Stephenson was of course awarded Britain's Military Cross and Distinguished Flying Cross for his heroics in France. In September 2009 his medals and other effects were displayed in Manitoba's legislative building, in Winnipeg.

William Stevenson describes a dinner held at Lord Beaverbrook's house in May or June 1940 which Stephenson purportedly attended. Churchill's private secretary Jock Colville casts doubt on Stevenson's account, pointing out that the invitation that Churchill supposedly sent Stephenson was clearly a forgery. The highly punctilious Churchill would never have called Beaverbrook "the beaver", and he would never have signed himself "W.C." (the abbreviation for "water closet)." Moreover, Stevenson reports that Lord Trenchard chatted with Stephenson about his own fighter plane; however, in 1940 Trenchard was over 65 years old and was retired from the military. In author William Stevenson's papers at the University of Regina there is a reference to the Beaverbrook dinner, noting that in later years Stephenson had cabled the author that he did not recall the exact date of the gathering. There is no mention of Stephenson having received an invitation from Churchill. In his foreword to Richard Dunlop's Donovan, Stephenson writes that he received a telephoned invitation to the dinner.

In his 1981 book The Churchillians,Jock Colville took issue with Stevenson's description of Stephenson's wartime relations with Churchill. Colville pointed out that Stephenson was not Churchill's personal liaison with Roosevelt, that in fact (as is well known) the two leaders corresponded directly. Indeed, Colville contends that he never heard Churchill speak of Stephenson (which may say as much about Churchill's relations with Colville, an Assistant Private Secretary, as it does about his relations with the spy Stephenson). Based on this and other questions, Colville expressed the hope that Stevenson's book would not be "used for the purpose of historical reference." Meanwhile, numerous other references to a Stephenson-Churchill connection can be found; for example, in Maclean’s magazine, 17 December 1952, and The Times, 21 October 1962. The relationship is also referenced in Hyde’s biography of Stephenson, The Quiet Canadian (1962). In addition, British–Soviet double agentKim Philby, in his book My Silent War, refers to Stephenson as a friend of Churchill's. Stephenson’s personal secretary and personal cipher clerks mention Stephenson-Churchill communications in The True Intrepid and in the documentary film Secret Secretaries. In CIA historian Thomas Troy's book Wild Bill and Intrepid, there is a chapter on the relationship based on several direct interviews conducted by the author with Stephenson on Bermuda which discounts much of the criticism of West and Hugh Trevor-Roper.